"The BCA-level budget caps with the automatic reductions
currently in effect once seemed like a worst-case scenario for the defense
budget. Now that sequestration has gone into effect and the deepest part of the
decline from (fiscal year 2012-13) has already occurred, the BCA budget caps
may be more of a ceiling than floor in the coming years," analyst Todd Harrison
wrote.

According to the report, the sequester caps will prevent the
Pentagon from carrying out its 2014 budget as submitted, even with cuts to
personnel costs and another round of Base Realignment and Closure. If
sequestration remains in place through 2023, Harrison said it will result in a
34 percent drawdown from 2010 spending levels.

DOD's 2014 budget requests $613 billion. That includes base
discretionary budget of $527 billion with war spending of $79 billion and
mandatory budget of $7 billion. Sequestration's cuts in the new fiscal year
would lower that total amount by about $52 billion.

The Department of Defense lost $37 billion to sequestration last
fiscal year. This year's budget proposal is $52 billion above the sequestration
caps and Pentagon officials have signaled those cuts will bring reductions in
force and curtailments to training and weapons programs.

The House/Senate Budget Committee tasked with working on a
spending plan before the Jan. 15, 2014 deadline - the same date sequestration
will officially begin - is expected to include the across-the-board cuts in its
negotiations. The final results are unknown, however, and Harrison said the
Pentagon can't repeat its mistakes of not planning for the impact.

"Plan for the cuts. Plan for the worst. Hope for the best,"
Harrison said.

Experts say bank on sequestration continuing

Last year, most defense officials, economists and experts
said they didn't think sequestration would occur.

They were wrong and a new study shows economists at least
aren't as optimistic now.

A USA Today survey released last week showed 46 percent of
economists believe sequestration will take effect in January as scheduled,
while 34 percent think the cuts will go into effect at the beginning of the new
year but at a reduced rate. Only 2 percent believe sequestration will be halted
indefinitely.